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Volvo plans Chengdu assembly plant

Published on February 25, 2011 by Tycho de Feijter

Volvo Cars Corporation, the automaker acquired by Zhejiang Geely Holding Group Co last year, will build its first Chinese assembly plant in the city of Chengdu, a person with direct knowledge of the plan said.

The Swedish carmaker’s supervisory board signed off on the new factory at a meeting on Tuesday, said the person, who asked not to be identified ahead of the official announcement on Friday. Volvo Cars spokesman Stefan Elfstrom declined to comment.The Chinese factory will probably have an annual capacity of 100,000 cars, and may open in early 2013, spokesman Olle Axelson said before the board’s vote. Volvo currently makes its S40 and S80L models for China at a factory co-owned by Ford Motor Co and Chongqing Chang’an Automobile Co.

Chinese growth is key to Chief Executive Officer Stefan Jacoby’s ambition of doubling sales to 800,000 cars in 10 years. Volvo Cars, which Ford sold to Zhejiang Geely in August for $1.5 billion, aims to sell 250,000 cars in China by 2015, up from 30,522 in 2010, according to spokesman Per-Ake Froberg.

“China will be the biggest contributor to meeting the 800,000-unit global target,” said Ashvin Chotai, a London-based managing director of the industry consultant Intelligence Automotive Asia. “Stepping up local production is a very important step in being successful in the China market.”

Volvo Cars was considering Chengdu in Sichuan province, Daqing in Heilongjiang province, and Shanghai’s Jiading district as possible locations, Axelson said on Tuesday. Zhejiang Geely owns 51 percent of Volvo Cars, while Daqing has 37 percent and Jiading has 12 percent.

Volvo plans to hold a groundbreaking ceremony in Chengdu on Tuesday, signaling the beginning of its factory construction, a person with direct knowledge of the plan said on Tuesday.

Economic growth and government incentives boosted China’s vehicle sales by 32 percent to 18.1 million in 2010, helping the nation outpace the United States as the world’s largest auto market for a second year.

Volvo’s main rivals boosted their sales in China last year. Volkswagen AG’s Audi sold 227,938 cars in the country last year, up 43 percent from 2009. Daimler AG’s Mercedes-Benz sold 148,400 cars, more than double the previous year, while Bayerische Motoren Werke AG sold 168,998 units, a gain of 87 percent.

Zhejiang Geely, which sold more than 415,000 vehicles in 2010, aims to boost sales and production this year by at least 18 percent, the company said on Jan 6.